Compute the forecasts for each month

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Lenovo uses the ZX-81 chip in some of its laptop computers. The prices for the chip during the past 12 months were as follows:

 MONTH PRICE FOR CHIP MONTH PRICE FOR CHIP January \$1.80 July 1.80 February 1.67 August 1.83 March 1.70 September 1.70 April 1.85 October 1.65 May 1.90 November 1.70 June 1.87 December 1.75

a) Use a 2-month moving average on all the data and plot the averages and the prices.

b) Use a 3-month moving average and add the 3-month plot to the graph created in part (a).

c) Which is better (using the mean absolute deviation): the 2-month average or the 3-month average?

d) Compute the forecasts for each month using exponential smoothing, with an initial forecast for January of \$1.80. Use a = .1, then a = .3, and finally a = .5. Using MAD, which a is the best?

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